If your limited company buys plant or machinery for use in the trade, full expensing lets you deduct the entire cost from your taxable profits in the year you buy it. No spreading the cost over several years. No complex pooling calculations. One deduction, one tax year.
This relief has been permanent since the Spring Budget 2023, replacing the temporary super-deduction that ended on 31 March 2023. It applies to most new plant and machinery assets bought on or after 1 April 2023. For a company paying 25% corporation tax, a £100,000 piece of equipment saves £25,000 in tax in year one.
Here is what qualifies, what does not, and exactly how to claim it on your CT600 corporation tax return.
What Assets Qualify for Full Expensing
Full expensing covers new and unused plant and machinery assets that would normally go into the main pool (8% rate) or special rate pool (6% rate). The key condition is that the asset must be unused and bought for use in your company's qualifying trade.
Qualifying assets include:
- Commercial vehicles (vans, lorries, tractors)
- Plant and machinery used in manufacturing or processing
- Computer equipment and servers
- Office furniture and fittings
- Construction equipment (diggers, cement mixers, scaffolding)
- Agricultural machinery
- Refrigeration and catering equipment
- Solar panels and renewable energy installations
Assets must be physically brought into use in the trade. You cannot claim full expensing on an asset you buy but never use. The company must also own the asset outright or under a hire purchase contract where ownership transfers at the end.
Special Rate Assets and Full Expensing
Full expensing also applies to special rate pool assets. These include integral features (lifts, air conditioning, electrical systems, water systems) and long-life assets (expected life of 25 years or more). The relief is still 100% in year one. There is no reduced percentage for special rate assets under full expensing.
This is a significant improvement over the old super-deduction, which only gave 50% for special rate assets. A company installing a new air conditioning system in a Manchester office costing £60,000 can deduct the full £60,000 in year one, saving £15,000 in corporation tax at 25%.
What Does Not Qualify
Several categories are explicitly excluded from full expensing. Know these before you plan a purchase.
- Second-hand assets. Full expensing only applies to new and unused plant and machinery. Second-hand assets go into the main pool or special rate pool and attract writing down allowances at 18% or 6% per year.
- Cars. Cars are excluded from full expensing entirely. Most cars go into the special rate pool (6%) with restricted capital allowances based on CO2 emissions. Only new zero-emission cars qualify for 100% first year allowances under separate rules.
- Assets bought to lease out. If your company buys plant or machinery and leases it to another business, full expensing does not apply. The asset goes into the main pool and attracts writing down allowances instead.
- Assets bought before 1 April 2023. The super-deduction (130% for main pool, 50% for special rate) applied to assets bought between 1 April 2021 and 31 March 2023. Full expensing applies from 1 April 2023 onwards.
- Assets not used wholly for a qualifying trade. If an asset has mixed use (part business, part personal), full expensing is restricted to the business proportion.
How Full Expensing Interacts with the Annual Investment Allowance
The Annual Investment Allowance (AIA) gives 100% relief on most plant and machinery (new and second-hand) up to £1,000,000 per year. Full expensing sits alongside the AIA, not instead of it.
For new assets that qualify for full expensing, you can choose either relief. The result is the same: 100% deduction in year one. For second-hand assets, you must use the AIA (up to the £1m limit) or writing down allowances.
In practice, most companies claim full expensing on new assets and reserve the AIA for second-hand purchases. This keeps the AIA headroom available for used equipment. A Bristol-based joinery company buying £80,000 of new machinery and £30,000 of second-hand equipment would claim full expensing on the £80,000 and AIA on the £30,000. Total deduction: £110,000.
Claiming Full Expensing on Your Corporation Tax Return
You claim full expensing on the capital allowances computation that sits behind your CT600 corporation tax return. The claim goes in the capital allowances section of the tax computation, not on the CT600 form itself.
Here is the process step by step:
- Identify all qualifying new plant and machinery bought in the accounting period.
- Calculate the total cost of those assets.
- Include that amount as a full expensing claim in your capital allowances computation.
- Deduct the claim from your trading profits before corporation tax is calculated.
- File the CT600 with supporting schedules showing the capital allowances breakdown.
Most accounting software packages (Xero, FreeAgent, QuickBooks) handle this automatically when you tag an asset as qualifying for full expensing. Your accountant will review the computation to ensure the claim is correct and supported by invoices.
If you prepare your own tax return, you will need to complete a separate capital allowances schedule. HMRC does not provide a specific form for this. Your tax computation should show the full expensing claim as a line item, with the total cost and the deduction clearly stated.
Example: Full Expensing in Practice
A Leeds-based digital marketing agency buys new computer equipment for £45,000 and new office furniture for £15,000 in the year to 31 March 2025. Both are new and unused. Both qualify for full expensing.
Total qualifying expenditure: £60,000.
Full expensing claim: £60,000.
Corporation tax saved at 25%: £15,000.
Without full expensing, the £60,000 would go into the main pool and attract writing down allowances of 18% per year. Year one deduction would be £10,800. Full expensing gives six times that relief in year one.
Full Expensing and the Company Car Decision
Full expensing does not apply to cars. This is a common point of confusion. If your company buys a new van, full expensing applies. If it buys a new car, it does not.
New zero-emission cars (electric vehicles) qualify for 100% first year allowances under separate legislation. This gives the same result as full expensing: full deduction in year one. New cars with CO2 emissions between 1g/km and 50g/km attract 18% writing down allowances. Cars above 50g/km go into the special rate pool at 6%.
If your company is considering a fleet purchase, factor this into the vehicle choice. A Birmingham courier company buying five new electric vans at £35,000 each can claim full expensing on the full £175,000. The same company buying five petrol vans would also qualify for full expensing (vans are plant and machinery, not cars). The distinction matters most for cars, not commercial vehicles.
Disposals and Balancing Charges
When you sell or dispose of an asset on which you claimed full expensing, the disposal proceeds are brought into the capital allowances computation. This creates a balancing charge that increases taxable profits in the year of disposal.
Because full expensing gave 100% relief in year one, the asset has a nil tax written down value. Any sale proceeds are therefore fully taxable as a balancing charge. If you bought a machine for £50,000, claimed full expensing, and sold it three years later for £20,000, that £20,000 is added to your taxable profits in the year of sale.
This is not a penalty. It is the correct tax treatment. You got relief on the full cost. When you recover some of that cost through sale, the relief is clawed back. The net result is that you get tax relief on the true economic cost of the asset (purchase price minus sale proceeds), just spread across different accounting periods.
Full Expensing for Groups and Associated Companies
Full expensing is not capped. There is no monetary limit on how much you can claim in a single year. This differs from the AIA, which has a £1m cap per group of associated companies.
For groups, each company claims full expensing on its own qualifying expenditure. There is no group-wide limit. A holding company with five trading subsidiaries can each claim full expensing on their respective purchases. If each subsidiary spends £500,000 on new machinery, the group claims £2.5m in full expensing deductions across six CT600 returns.
Associated company rules still apply for corporation tax rate purposes (marginal relief between £50k and £250k profits). But they do not restrict full expensing claims.
Common Mistakes and How to Avoid Them
Three errors crop up regularly with full expensing claims.
Claiming on second-hand assets. Full expensing is for new assets only. If you buy used equipment, use the AIA or writing down allowances. HMRC will reject a full expensing claim on second-hand plant.
Claiming on assets not yet brought into use. The asset must be physically used in the trade before the end of the accounting period. If you buy a machine in March but it is not installed until May, you cannot claim full expensing in the March year-end. The claim moves to the following period.
Claiming on assets bought to lease. If your company buys equipment and leases it to customers, full expensing does not apply. The asset goes into the main pool. This catches out property companies buying fixtures for rental properties and equipment hire businesses.
Should You Claim Full Expensing or Spread the Relief?
In almost all cases, full expensing is the better option. Getting 100% relief in year one improves cash flow and reduces your corporation tax bill immediately. There is no downside unless you expect to be in a higher tax rate in future years and want to defer relief to offset those higher rates.
Even then, the time value of money usually favours early relief. A pound saved today is worth more than a pound saved in three years. Unless your company is loss-making and cannot use the relief, claim full expensing.
For loss-making companies, full expensing creates or increases a trading loss. That loss can be carried forward against future profits or surrendered to group companies. The relief is not wasted. It just moves to a later period.
How Holloway Davies Can Help
Full expensing is straightforward for most purchases, but the detail matters. Getting the classification wrong between plant and machinery, integral features, and buildings can cost thousands in missed relief. Our ICAEW qualified team reviews your capital allowances computation as part of your corporation tax return preparation. We check that every qualifying asset is captured and that exclusions are correctly applied.
If you are planning a significant capital investment in the next 12 months, talk to us before you buy. The timing of the purchase relative to your year-end affects when the relief lands. A purchase in March versus April can shift the tax saving by a full year. We can help you plan the optimal timing.
Contact us through our contact page or speak to your usual client manager. We work with limited companies across every sector, from a 4-employee software consultancy in Manchester to a 50-person manufacturing business in Sheffield.